Customers flee for northern rock bank?

what has happened with northern rock bank? i see crowds and crowds of people standing outside the bank?

what is the problem with them?

I think you are in "Answers" too much, turn off the computer and read!!

Basically everything is down to the US. A lot of people in the US have started defaulting on their mortgages due to high interest rates. Because the banks do not know the full impact of this, apart from the fact that there are going to be some large losses, they have had to tighten their belts a bit.

In the normal course of finance, banks loan each other large amounts of money, which then goes out in the forms of loans and mortgages. This goes on all the time and is nothing new. However, because of the situation in the US banks have decided to stop lending to each other.

This hasn't affected most banks, as they still have large amounts of money coming in from people putting it in their accounts. However, because 70% of Northern Rocks comes from giving out mortgages rather than bank accounts, they didn't have so much money coming in as the other banks.

As a result, they have borrowed some money from the bank of england to see them through. They haven't spent it, but the important thing is its there if they need it.

However, due to sensationlist reporting at the end of last week, the media managed to whip every into a frenzy thinking that Northern Rock is near to collapse. This isn't the case, they still have huge amounts of assets, and they wouldn't have been granted the loan from the bank of england if there was any risk.

Despite this, many people being uninformed went down to Northern Rock to take out all their savings, as they mistakenly thought they could lose the money. Pictures on the news and in the papers of huge queues of people taking their money out only made people panic more. Â£2 billion pounds was taken out on friday alone, even though the money was safe.

Again today there have been large queues. So many people are taking out there money that its turned into a self fulfilling prophecy - people thought northern rock would collapse, so they took out their money, and this in turn has weakened northern rock.

There is still no sign that northern rock could collapse, but they are weakened, and its likely they will now get taken over by another bank or building society.

Its a shame, as there was no need for any of this to happen. If people hadn't panicked and the media had reported the facts, northern rock would be trading as normal today.

For more details about the current situation and how it affects people, have a look at the new northern rock questions and answers page on my website below.

Search them on Yahoo.... it will tell you all you want to know.

Don't you listen to or watch the news, or read a paper.
Very simply they asked the Bank of England for a loan now the scaremongers are trying to convince everyone they are going bust, which is not true.
The queues you saw are the morons pulling their money out because they "read it in the Sun so it must be true".

They thought they was on a good thing 2 years go but things didn't work out for them,,,but if you drew all your cash out,,,if you walked back in and put it back in there bank the interest would be greater than when you had your money in ,,the first place Crazy,,,,,

The obvious way to have made a fortune, in the last week, was to withdraw your cash, and buy the Northern Rock shares----wasnt it?

best bet is listen to the news programmes

You must have been hibernating. The bank had to get a loan off the Bank of England to cover a short term problem. Then the lemmings arrived and made things worse. There is no risk to their cash.

LONDON (Reuters) - Thousands of customers queued to withdraw savings from embattled bank Northern Rock on Monday and its shares plunged again, heightening pressure for a sale of the business or its assets.

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The country's fifth-biggest mortgage lender, which on Friday was rescued by emergency Bank of England funding, said there was no need for investors or customers to panic and it remained solvent.

Nevertheless, customers appeared set to continue pulling out savings and by early on Monday its shares had more than halved in value since Thursday's close.

"I didn't initially panic but the more you watch the news and read you think maybe we ought to do it as well," said Barbara Williams, retired, as she stood in line with hundreds of others at the Oxford Circus branch.

"We thought we would do what everyone else is doing. Rightly or wrongly it's a chance you can't take."

Fears have mounted that a run of withdrawals will exacerbate the lender's funding problems and force a fire sale of the business. The problems were triggered by the global credit crunch as banks, worried about exposure to dodgy U.S. mortgage debt, jacked up the price of lending to each other.

As the fallout threatened to have wider economic and political impact, Chancellor Alistair Darling said authorities would consider every option to solve the crisis.

By 11 a.m. shares in the bank were down 32 percent at 296 pence, following a 31 percent tumble on Friday to cut the bank's market value to under 1.3 billion pounds. The shares fell as low as 290p and have lost 70 percent this year.

"The franchise is broken -- the deposit franchise at least -- the run on the bank is happening as we speak and could see as much as 12 billion (pounds) of deposits withdrawn," said Mamoun Tazi, analyst at MF Global. "One way for this to stop is for the bank to be taken over."

The Newcastle-based bank provides one in 13 home loans. The central bank, as lender of last resort, stepped in on Friday to offer emergency funding to ease its funding problems after it struggled to borrow in money markets.

The bank had not drawn on the emergency facility by Sunday, the government said.

News of the emergency funding line sent thousands of Northern Rock's 1.4 million savings customers rushing to branches and to the Internet for their money. Customers were estimated to have withdrawn about 1.5 billion pounds on Friday and Saturday.

Some reports said as much as 2 billion pounds has been withdrawn, which would represent about 8 percent of its deposits.

Government, banking and regulatory officials are monitoring the situation closely, trying to halt the run on withdrawals.

But there was an element of panic and frustration across the bank's 76 branches.

"I didn't sleep at all on Friday night. It's a lot of money and I was very distressed and my husband was as well," said Karen Dawson, 53, a lawyer who was among hundreds in line at the Oxford Circus branch after failing to access her account via the Web site and by telephone since the crisis broke.

More significant could be the reaction of postal account holders, however, who account for 10 billion pounds of the bank's 24 billion pounds of retail deposits.

"YOUR MONEY IS SAFE..."

Northern Rock Chief Executive Adam Applegarth sought to reassure customers that their savings were secure via a message posted on the company's Web site, www.northernrock.co.uk.

"Your money is safe with us and if you want some, or all of it back, then you are perfectly entitled to it. Whilst you may have to wait a little longer than usual to receive it, you will get it," Applegarth said in the message posted on Sunday.

Northern Rock has hoisted a "for sale" sign up and banks including Lloyds TSB have considered deals, according to industry sources, but suitors have been put off by difficult credit markets and uncertainty about the true valuation.

Analysts said the bank, approaching its 10th anniversary as a listed company, is unlikely to survive in its present form.

Options include an outright sale or the slicing up of its 100 billion pound mortgage portfolio among the country's other major banks, which industry sources said could happen but was not imminent.

Other alternatives could include a rundown of the business in which cash is returned to depositors, branches closed and loans repaid.

Other bank shares were hit in the wake of the turmoil, with shares in Alliance & Leicester slumping 14 percent and big names such as HBOS, Royal Bank of Scotland and Barclays all down over 4 percent.

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